Q3 2008 REVENUES EQUAL TO 7,561 MILLION EUROS, AN IMPROVEMENT ON PREVIOUS QUARTERS (DOWN 1.5% IN ORGANIC TERMS, COMPARED WITH A 3.6% DROP IN Q2 2008)
ORGANIC Q3 EBITDA MARGIN EQUAL TO 41.0%, UP FOR THE FIRST TIME SINCE 2007
OPERATIONAL PERFORMANCE IMPROVED IN GERMANY AND BRAZIL
NET INCOME FOR THE FIRST NINE MONTHS OF 2008 EQUAL TO 1,770 MILLION EUROS; 630 MILLION EUROS IN Q3 2008
NET DEBT EQUAL TO 35,770 MILLION EUROS AS AT SEPTEMBER 30, 2008, DOWN FROM JUNE 30, 2008
BERNABÈ: “IN Q3, TELECOM ITALIA’S REVENUES AND MARGINS PICKED UP AGAIN, WHICH WILL ALLOW US TO HIT OUR 2008 TARGETS”
THE CREATION OF THE TELECOM ITALIA FOUNDATION WAS ANNOUNCED
OLIVETTI: FRANCESCO FORLENZA NOMINATED CHAIRMAN, PATRIZIA GRIECO NOMINATED CEO
Q3 2008
REVENUES: 7,561 MILLION EUROS (DOWN 1.5% IN ORGANIC TERMS COMPARED WITH THE SAME PERIOD LAST YEAR), AN IMPROVEMENT ON Q2 2008 (DOWN 3.6% IN ORGANIC TERMS COMPARED WITH THE SAME PERIOD LAST YEAR) AND AN IMPROVEMENT ON Q1 2008 (DOWN 4.0% IN ORGANIC TERMS COMPARED WITH THE SAME PERIOD LAST YEAR). RESULTS FROM THIS PERIOD WERE MAINLY ACHIEVED DUE TO THE POSITIVE TREND IN THE DOMESTIC BUSINESS.
EBITDA: 3,087 MILLION EUROS, (DOWN 1.3% IN ORGANIC TERMS COMPARED WITH THE SAME PERIOD LAST YEAR), A MAJOR IMPROVEMENT ON Q2 2008 (DOWN 9.9% IN ORGANIC TERMS COMPARED WITH THE SAME PERIOD LAST YEAR).
ORGANIC EBITDA MARGIN: 41% (40.8% FOR THE SAME PERIOD LAST YEAR), THANKS TO SIGNIFICANTLY IMPROVED PERFORMANCE FROM DOMESTIC BUSINESS AND THE FIRST RESULTS OF THE NEW OPERATING MANAGEMENT IN BRAZIL.
EBIT: 1,596 MILLION EUROS (DOWN 6.4% IN ORGANIC TERMS COMPARED WITH THE SAME PERIOD LAST YEAR), AN IMPROVEMENT ON Q2 2008 (DOWN 21.6% IN ORGANIC TERMS COMPARED WITH THE SAME PERIOD LAST YEAR), SPURRED ON BY GOOD OPERATIONAL PERFORMANCE.
FIRST NINE MONTHS OF 2008:
REVENUES: 22,399 MILLION EUROS, DOWN 2.6% COMPARED WITH THE FIRST NINE MONTHS OF 2007 (DOWN 3.3% IN THE FINAL ACCOUNTS FOR THE FIRST HALF OF 2008 ); ORGANIC VARIATION DOWN 3.0% (DOWN 3.8% IN THE FINAL ACCOUNTS FOR THE FIRST HALF OF 2008)
EBITDA: 8,622 MILLION EUROS, DOWN 9.1% COMPARED WITH THE FIRST NINE MONTHS OF 2007, (DOWN 12.6% IN THE FINAL ACCOUNTS FOR THE FIRST HALF OF 2008); ORGANIC VARIATION DOWN 6.0% (DOWN 8.3% IN THE FINAL ACCOUNTS FOR THE FIRST HALF OF 2008)
ORGANIC EBITDA MARGIN EQUAL TO 39.9% (39.4% IN THE FINAL ACCOUNTS FOR THE FIRST HALF OF 2008)
EBIT: 4,204 MILLION EUROS, DOWN 20.5% COMPARED WITH THE FIRST NINE MONTHS OF 2007 (DOWN 26.6% IN THE FINAL ACCOUNTS FOR THE FIRST HALF OF 2008); ORGANIC VARIATION DOWN 14.7% (18.8 % IN THE FINAL ACCOUNTS FOR THE FIRST HALF OF 2008)
ORGANIC EBIT MARGIN WAS 20.1% (19.6% IN THE FINAL ACCOUNTS FOR THE FIRST HALF OF 2008)
GROUP LIQUIDITY STOOD AT AROUND 5,800 MILLION EUROS, IN ADDITION TO THE AVAILABLITY OF IRREVOCABLE LONG TERM CREDIT LINES FOR 6,500 MILLION EUROS
NET FINANCIAL DEBT AS AT SEPTEMBER 30, 2008 AMOUNTED TO 35,770 MILLION EUROS (35,701 MILLION EUROS AT Y/E 2007); COMPARED WITH JUNE 30, 2008 (37,172 MILLION EUROS) NET FINANCIAL DEBT WAS DOWN 1,402 MILLION EUROS, FOLLOWING POSITIVE OPERATIONAL PERFORMANCE AND THE SALE OF THE LIBERTY SURF GROUP (757 MILLION EUROS)
CAPEX WAS UP 372 MILLION EUROS TO 3,967 MILLION EUROS, A RISE OF 10.3% COMPARED WITH THE FIRST NINE MONTHS OF 2007; CAPEX WAS EQUIVALENT TO 17.7% OF REVENUES (15.6% IN THE FINAL ACCOUNTS FOR Q3, 2007)

Disclaimer. This press release, particularly the section "Outlook for the 2008 financial year", contains forward-looking statements about the Group's intentions, beliefs and current expectations with regard to its financial results and other aspects of operations and strategies. Readers should not place undue reliance on such forward-looking statements, as final results may differ significantly from those contained in such statements owing to a number of factors, the majority of which are beyond the scope of the Group’s control.

This press release contains alternative performance indicators not contemplated under IFRS accounting standards (EBITDA; EBIT; Organic Difference in Revenues, EBITDA and EBIT; and Net Financial Borrowings). These terms are defined in the appendix.

Telecom Italia Group CEO Franco Bernabè said, “At a time when the world has become a different place and the financial crisis is beginning to impact the real economy, we posted an impressive quarter. In this scenario, the telecommunications industry has not demonstrated particular weaknesses; thanks in part to the actions that we initiated at the start of the year, Telecom Italia was able to end the period with improved revenues and margins, in line with the upwards trend we have seen throughout 2008.

"This impressive overall result was bolstered by performance on our markets outside Italy, as may be seen from the accounts of our Brazilian and German subsidiaries.

"These results allow us to confirm the year-end targets that we announced previously to the market”.

TELECOM ITALIA GROUP

The Telecom Italia Group Interim Financial Statements for the first nine months of 2008 has been drafted in observance of article 154–ter (Financial Reports), Legislative Decree no. 58/1998 (the Unified Finance Law or TUF) and subsequent amendments and additions, and in observance of CONSOB Communication DEM/8041082, issued on April 30, 2008 (Quarterly company disclosures by listed share issuers for which Italy is the original Member State)..The Interim Financial Statements have not undergone an external audit. They were drafted in compliance with international accounting principles issued by the International Accounting Standards Board and approved by the European Union (“IFRS”).There have been no substantial changes to the consolidation area compared with the first half report on operations.

Revenues were down 2.6%at 22,399 million euros, from 23,004 million euros in the first nine months of 2007 (a reduction of 605 million euros). Excluding the effect of changes to exchange rates (up 155 million euros), the consolidation area (down 33 million euros, mainly for the inclusion of AOL’s German internet assets from March 1, 2007, and the exclusion of Entel Bolivia in the second quarter of 2008), and a 24 million euro reduction in revenues (entered to take into account changes to termination rates, and settlement of tariff disputes with other carriers), the organic variation was down 3.0% (down 703 million euros).

The following table provides a breakdown of revenues by Business Unit:

(million euros)

1 Jan – 30 Sep 2008

1 Jan – 30 Sep 2007

Domestic

17,154

18,108

European Broadband

961

824

Brazil Mobile

3,973

3,603

Media

210

178

Olivetti

252

283

Other operations

114

166

Adjustments and eliminations

(265)

(158)

Consolidated Total

22,399

23,004

A detailed report on organic variation in revenues performance by business unit follows.

The Domestic business unit recorded a 906 million euro reduction in revenues, and was affected by the following regulatory changes:

From March 2007, application of the so-called “Bersani Decree”, (which had a 125 million euro impact in terms of lower revenues, recorded wholly in the first quarter);

A reduction in termination rates during the second half of 2007 (190 million euros less);

Adjustments to international roaming rates within the EU, following European Commission indications (156.5 million euros less).

Taken together, these "regulatory impacts" reduced revenues by 542.5 million euros. Renegotiation of the domestic roaming contract with H3G had a further 48.5 million euro negative impact on revenues, while the conclusion of a number of international wholesale transit contracts from the second quarter of 2007 had a further impact of 166 million euros less.

The European Broadband business unit earned higher revenues of 69 million euros.
The Brazil Mobile business unit earned higher revenues of 180 million euros, following expansion of value added voice services sustained by ongoing customer base growth.
The Media business unit earned 32 million euros in higher revenues, principally as a result of revenue growth from Digital Terrestrial TV (agreements with Mediaset and Telecom Italia for SerieA football rights).Olivetti business unit revenues were down 16 million euros compared with the same period in 2007. Higher revenues from specialist printers were offset by a slowdown in the sale of traditional inkjet products and accessories.

Foreignrevenues (defined on the basis of customer geographical location) amounted to 6,610 million euros (6,559 million euros in the first half of 2007): 59.6% of this originated in Brazil (54.5% in the first nine months of 2007).

Q3 2008 revenues amounted to 7,561 million euros (7,667million euros in Q3 2007), down 1.4% on the corresponding period in 2007. Excluding the effect of exchange rate fluctuations (up 68 million euros, mainly regarding the Brazil Mobile business unit) and the consolidation area (down 55 million euros), the organic variation of revenues dropped 1.5%. Third quarter 2008 revenue performance was impacted by the regulatory changes noted above, worth 149 million euros, and by the renegotiation of a domestic roaming contract with H3G (down 18 million euros).

EBITDA (Operating income prior to depreciation and amortization, capital gains/(losses) realized and impairment reversals/(losses) on non-current assets) amounted to 8,622 million euros, down 9.1% compared with the first nine months of 2007 (down 862 million euros); the EBITDA margin amounted to 38.5% (41.2% in the first nine months of 2007).

Excluding the effects of exchange-rate fluctuations and changes to the scope of consolidation, in addition to other non-organic variations, the organic variation in EBITDA amounted to minus 6.0% (down 570 million euros). This variation breaks down as follows:

1 Jan - 30 Sep 2008

1 Jan - 30 Sep 2007

Change

(millions of euro)

(a)

(b)

(a-b)

%

EBITDA (HISTORICAL BASIS)

8,622

9,484

(862)

(9.1)

Effect of change in the scope of consolidation

(39)

Effect of change in exchange rates

29

Non-organic (Income) Expenses

335

53

Charges for job mobility pursuant to law no. 223/91

287

-

Provisions and expenses for disputes and settlement

37

33

Other expenses, net

11

-

Provisions for fine by Competition Authority

-

20

COMPARABLE EBITDA

8,957

9,527

(570)

(6.0)

The organic EBITDA margin amounted to 39.9% (41.2% in the first nine months of 2007).

The above-mentioned regulatory changes, along with the renegotiation of H3G's domestic roaming contract, had a 436 million euro negative impact on EBITDA, which was also affected by 287 million euros in employee-related charges following the initiation of mobility procedures pursuant to law no. 223/91 at the end of June, for which an agreement was signed with the unions on September 19, 2008. in addition, the personnel costs for the first nine months of 2007, were impacted positively by a one off bonus for a total of 110 million euros.

In Q3 2008, EBITDA was down 2.0% to 3,087 million euros (3,149 million euros in Q3 2007). The organic variation in EBITDA was down 1.3% (40 million euros less). The EBITDA margin amounted to 40.8% (41.1% in Q3 2007). The organic EBITDA margin in Q3 2008 was equal to 41.0% (40.8% for the same period last year).

EBIT (operating result) amounted to 4,204 million euros, down 20.5% compared with the first nine months of 2007 (down 1,083 million euros). The EBIT marginamounted to18.8% (23.0% in the first nine months of 2007). The organic variation in EBIT registered a decrease of 781 million euros (down 14.7%). This breaks down as follows:

1 Jan - 30 Sep 2008

1 Jan - 30 Sep 2007

Change

(millions of euro)

(a)

(b)

(a-b)

%

HISTORICAL EBIT

4,204

5,287

(1,083)

(20.5)

Effect of change in the scope of consolidation

(28)

Effect of change in exchange rates

(4)

Non-organic (income) expenses

310

40

Non-organic expenses already stated as EBITDA

335

53

Non-recurring gains on the sale of properties

(25)

(10)

Other non-organic net income

-

(3)

COMPARABLE EBIT

4,514

5,295

(781)

(14,7)

The organic EBIT margin amounted to 20.1% (22.9% in the first nine months of 2007).

In Q3 2008, EBIT amounted to 1,596 million euros (1,733 million euros in Q3 2007), following a 7.9% reduction. The organic variation in EBIT was down 6.4% (down 109 million euros). The EBIT margin amounted to 21.1% (22.6% in Q3 2007). The organic EBIT margin in Q3 2008 came to 21.2% (22.3% for the same period last year).

EBIT was impacted not just by the factors stated with regard to EBITDA, but also by depreciation and amortization of 4,437 million euros (4,209 million euros in the first nine months of 2007, a rise of 228 million euros).

The balance of financial income and charges came to minus 1,963 million euros (compared with minus 1,425 million euros in the first nine months of 2007). A breakdown follows:

Net financial charges, adjusted to the fair value of derivatives and other items

(1,787)

(1,720)

(67)

Total

(1,963)

(1,425)

(538)

With regard to the write-down of receivables from Lehman Brothers Special Financing Inc, the Telecom Italia Group and Lehman Brothers Special Financing Inc. were involved in operations guaranteed by that company regarding derivative instruments to hedge financial risks arising from financial payables. Following Lehman Brothers Holding Inc’s announcement that it was initiating bankruptcy proceedings the Telecom Italia Group commenced legal proceedings to wind up these operations early. As a consequence of these closures, the Telecom Italia Group, in order to determine to write-down receivables owing from Lehman Brothers Special Financing Inc. to their presumed realization value, for a total of 51 million euros.
Group liquidity increased once again in Q3, with net liquid assets up to around 5,300 million euros. A further 6,500 million euros is available through long-term non-revocable credit lines.

The net consolidated result amounted to 1,770 million euros (1,731 million euros before minority shareholders), down 20.3% compared with the first nine months of 2007 (2,220 million euros). The above-mentioned reduction in EBIT, worse performance of financial operations and equity interests were essentially offset by a reduction in income taxes (1,020 million euros). This reduction was the result of lower pre-tax profits, lowered tax bands, and a 515 million euro release of provisions for deferred taxation regarding sums set aside for advance depreciation and amortization during previous financial years, net of substitute tax (2008 Finance Act).

The Q3 2008 net consolidated result was a 630 million euro profit (623 million euros prior to minority shareholders). This was 90 million euros down on the Q3 2007 figure of 720 million euros (706 million euros prior to minority shareholders).

Capex for the first nine months of 2008 amounted to 3,967million euros, up 372 million euros compared with the same period last year (up 10.3%), mainly as a result of greater investments in Brazilian mobile operations, following the acquisition of 3G licenses.

Net financial debt at September 30, 2008 amounted to 35,770million euros (35,701 million euros at y/e 2007), down1,402 million euros compared with June 30, 2008 (37,172 million euros). Compared with y/e 2007, this figure reflected a 1,665 million euro dividend payment and acquisition of 3G licenses in Brazil (477 million euros). Net financial debt was favourably impacted by positive operating results andthe sale of the Liberty Surf Group.

On September 30, 2008, the Group’s headcount stood at 80,077, of whom 66,522 are in Italy (83,429 at year-end 2007, of whom 66,951 in Italy).

BUSINESS UNIT RESULTS
The Telecom Italia Group is organized by business segment:

“Other operations” includes financial enterprises and other minor firms that are not strictly associated with Telecom Italia Group core business.

Telecom Italia Media Group results for the first three quarters of 2008 were published in a press release issued on November 6, 2008, following the Board meeting called to approve the accounts.

DOMESTIC

Revenues amounted to 17,154million euros, down 5.3% (954 million euros lower) compared with the first nine months of 2007. Excluding exchange rate fluctuations, changes to the consolidation area and non-organic elements (amendments to termination rates and the settlement of tariff disputes with other carriers), the organic variation amounted to minus 5.0% (down 906 million euros). Revenues were impacted by:

The reduction in termination rates (190 million euros less);

The impact of the “Bersani Decree”, which went into effect in March 2007 (125 million euros less, net of a positive effect of consumption elasticity worth 226 million euros as a result of a reduction in average price pressure);

A realignment of international roaming tariffs within the European Union, in compliance with European Commission rulings (157 million euros less).

Taken together, compared with the previous year, these "regulatory impacts" reduced revenues by 543 million euros. Renegotiation of the domestic roaming contract with H3G had a further 49 million euro negative impact on revenues, while the conclusion of a number of international wholesale transit contracts from Q2 2007 had a further 166 million euro negative impact.
The further reduction in Business Unit revenues was essentially due to the fixed-line telecommunications retail voice segment, notably revenues from traffic (lower volumes and prices) and access (a contraction of the average customer base).

Fixed-Line TelecommunicationsFixed-line telecommunications revenues amounted to 11,128million euros, down 620 million euros compared with the same period in 2007 (down 5.3%). Excluding the impact of changes to exchange rates, the consolidation area and non-organic elements, the organic change in revenues was minus 572 million euros (down 4.9%).

Retail VoiceRetailVoicerevenues amounted to 5,692 million euros, down 602 million euros (9.6%) compared with the corresponding period in 2007, especially in the areas of traffic and access. The contraction in traffic was the result of falls in volume and price, mainly affecting fixed/mobile and domestic routes. Lower volumes reflect the physiological contraction of the market, a migration of traffic from fixed-line to mobile, along with a contraction of the average customer base. Prices were impacted by a reduction in fixed-line/mobile termination rates, and by higher take-up of flat-rated tariffs. The reduction in accesses is wholly ascribable to a contraction in the average customer base.

InternetInternet I revenues amounted to 1,208 million euros, up12.8% (up 137 million euros) compared with the corresponding period in 2007, thanks to continuing growth in Broadband revenues (up 13.2% or 126 million euros) and revenues fromcontent (up 65.3% or 32 million euros) compared with the same period in 2007. The overall domestic market Broadband access portfolio grew to 7.9million customers, of whom 6.6 million are retail customers. Strategy continues to focus on migrating customers towards higher value offerings in order to stabilize ARPU. Flat-rated offers now account for 76% of the entire retail broadband customer portfolio. VoIP customers now number around 1.8 million accesses, corresponding to 27.3% of the Retail Broadband access total. The IPTV service continued to make inroads onto the Consumer market (the portfolio grew by 138,000 customers on y/e 2007 to 218,000), while web offerings and operations continued to expand through the Virgilio/Alice portal.

Data BusinessData Business revenues amounted to 1,218 million euros. The 18 million euro (1.5%) reduction compared with the first nine months of 2007 reflects increasingly fierce competition in the Corporate clients market, as well as a government contract price review in June 2007. ICT services and products, however, continued to register dynamic growth, and posted a 59 million euro increase (up 13.1%).

WholesaleRevenues from Wholesale services amounted to 2,760 million euros, an overall 3.3% decrease (down 94 million euros) compared with the same period in 2007.
Revenues from domesticwholesale services amounted to 1,778 million euros, up 48 million euros compared with the same period in 2007. Excluding the effect of non-organic items, the increase was equivalent to 72 million euros, as a result of a larger customer base and the start-up of wholesale line rental. Revenues from international wholesale services amounted to 982 million euros, down 12.6% (142 million euros) compared with the first nine months of 2007, as a result of a reduction in transit revenues following the conclusion of a number of contracts from Q2 2007.

Mobile TelecommunicationsRevenues for the first nine months of 2008 amounted to 7,120 million euros, down 4.2% compared with the same period in 2007. The 309 million decrease may be attributed to changes that fall outside the sphere of the competitive market, that is to say, changes of a regulatory nature (the “Bersani Decree”, a reduction in incoming termination rates and international EU roaming traffic which had a negative impact of 426 million euros), and the previously-mentioned renegotiation of a roaming contract with H3G (down 49 million euros). Excluding these items, revenues were actually up, as a result of growth in usage of traditional voice services, and higher revenues from VAS services. Revenues from VAS services brought in 1,586 million euros (up 13% compared with the corresponding period in 2007) following greater penetration of interactive services, notably mobile broadband (domestic browsing revenues rose 36.4%). VAS revenues corresponded to 24% of all revenues from services (compared with 20.2% in 2007). Voice revenues (incoming and outgoing) amounted to 4,748 million euros, a drop of 446 million euros on the corresponding period in 2007 (down 9%). This reduction is almost wholly ascribable to the negative impact of changes of a regulatory nature.

Revenues from the sale of handsets reached508 million euros, an increase of 40 million euros on the same period in 2007, as the result of an enhanced mix of products sold.

As at September 30, 2008, Telecom Italia supplied 35.3 million mobile lines (of which 6.8 million are UMTS, corresponding to 19.3% of the total). This figure was down 2.9%compared with December 31, 2007, and corresponded to a 38.6%market share. In Q3 2008, the portfolio featured a greater number of high value customers (contract and business clients), as part of the strategy and sales policy to increase high-quality offerings for a selective user base.

Domestic Business UnitEBITDA amounted to 7,613 million euros, down 9.8% compared with the same period in 2007 (827 million euros lower). The EBITDA margin corresponded to 44.4% of revenues (down 2.2 percentage points compared with the same period in 2007). This result was significantly affected by the above-mentioned regulatory changes (worth a total of 388 million euros), the renegotiation of H3G's domestic roaming contract (49 million euros), and by charges associated with the initiation of staff mobility procedures pursuant to law no. 223/91 (287 million euros).

The organic EBITDA variation compared with the first nine months of 2007 was down 6.4% (down 546 million euros). The EBITDA margin amounted to 46.3% ( 46.9% during the same period in 2007) and breaks down as follows:

1 Jan - 30 Sep

1 Jan - 30 Sep

Change

(millions of euro)

2008

2007

absolute

%

EBITDA (HISTORICAL BASIS)

7,613

8,440

(827)

(9.8)

Effect of change in the scope of consolidation

-

8

Effect of change in exchange rates

-

(7)

Non-organic (income) expenses

335

53

Charges for job mobility pursuant to law no. 223/91

287

-

Provisions and expenses for disputes and settlement

37

33

Provisions for Competition Authority fine

-

20

Other expenses, net

11

-

COMPARABLE EBITDA

7,948

8,494

(546)

(6.4)

Domestic Business UnitEBIT was 4,227million euros, down 18.5% (957 million euros) compared with the first nine months of 2007. The EBIT margin amounted to 24.6% (28.6% during the same period in 2007). The organic EBIT variation corresponded to a drop of 13.3% (down 695 million euros). The organic EBIT margin corresponded to 26.4% (28.9% in the first nine months of 2007), and breaks down as follows:

1 Jan - 30 Sep

1 Jan - 30 Sep

Change

(milioni di euro)

2008

2007

absolute

%

HISTORICAL EBIT

4,227

5,184

(957)

(18.5)

Effect of change in the scope of consolidation

-

8

Effect of change in exchange rates

-

(2)

Non-organic (income) expenses

310

42

Non - organic (income) expenses already described under EBITDA

335

53

Additional non-organic (income) expenses:

(25)

(11)

Gains on the sale of properties

(25)

(11)

COMPARABLE EBIT

4,537

5,232

(695)

(13.3)

EBIT was affected by the factors stated in the comment on EBITDA, and by 135 million euros in higher amortization and depreciation.

Capex amounted to 2,646 million euros (down 171 million euros compared with the first nine months of 2007). Capital expenditure was equal to 15.4% of revenues (15.6% over the same period in 2007).

The company employed 63,988 members of staff, down 374 compared with December 31, 2007.

EUROPEAN BROADBAND

The Business Unit has changed since the 2007 accounts, following the exit of the Liberty Surf Group from the consolidation area. From the beginning of 2008, the unit has been entered on to the accounts as a discontinued operation, following the beginning of talks to sell it to the Iliad S.A, company. The sale was completed on August 26, 2008.
European Broadband business unit revenues amounted to 961 million euros, a 16.6% increment (137 million euros) compared with the first nine months of 2007. Organic growth on an equal perimeter basis amounted to 69 million euros (up 7.7%). The broadband customer portfolio as at September 30, 2008 exceeded 2.5 million accesses.

EBITDA, at 192 million euros, was down 20 million euros compared with the first nine months of 2007. The EBITDA margin amounted to 20.0% (25.7% during the same period last year). OrganicEBITDA registered a contraction of 27 million euros (down 12.3%) compared with the first nine months of 2007. A breakdown follows:

1 Jan - 30 Sep

1 Jan - 30 Sep

Change

(millions of euro)

2008

2007

absolute

%

EBITDA (HISTORICAL BASIS)

192

212

(20)

(9.4)

Effect of change in the scope of consolidation

-

7

COMPARABLE EBITDA

192

219

(27)

(12.3)

EBIT amounted to 9 million euros, down 80 million euros (down 89.9%) compared with the first three quarters of 2007. Organic EBIT dropped 83 million euros (down 90.2%) compared with the first nine months of 2007, as follows:

1 Jan - 30 Sep

1 Jan - 30 Sep

Change

(millions of euro)

2008

2007

absolute

%

HISTORICAL EBIT

9

89

(80)

(89.9)

Effect of change in the scope of consolidation

-

3

COMPARABLE EBIT

9

92

(83)

(90.2)

The EBIT figure worsened for the reasons adduced for the drop in EBITDA, and because of a significant rise in amortization (60 million euros higher) following greater investments in network infrastructure and backup IT systems at the end of 2007 and beginning of 2008, along with costs incurred for new customer activation.

Capex amounted to 253 million euros, down 16 million euros compared with the first nine months of 2007.

As at September 30, 2008, the company employed 3,002 people, a rise of 189 compared with December 31, 2007.

Germany (Hansenet - TI Deutschland)

1 Jan - 30 Sep 2008

1 Jan - 30 Sep 2007

Change

(millions of euro)

2008

2007

absolute

%

Revenues

899

767

132

17.2

EBITDA

185

197

(12)

(6.1)

% of Revenues

20.6

25.7

EBIT

18

89

(71)

(79.8)

% of Revenues

2,0

11,6

Capital expenditures

240

262

(22)

(8.4)

Holland (BBNed)

1 Jan - 30 Sep 2008

1 Jan - 30 Sep 2007

Change

(millions of euro)

2008

2007

absolute

%

Revenues

62

57

5

8.8

EBITDA

7

15

(8)

(53.3)

% of Revenues

11.3

26.3

EBIT

(9)

-

(9)

% of Revenues

(14.5)

Capital expenditures

13

7

6

85.7

BRAZIL MOBILE

(Average euro/real exchange rate: 0.39034)
Between the end of September 2007 and the end of September 2008, the Brazilian market for mobile lines grew by 24.8%. As at September 30, 2008, a total of 140.8 million lines were supplied to the market, corresponding to 73.2% population penetration; this compares with 112.8 million lines at September 30, 2007 (59.4% penetration), and 121 million lines at December 31, 2007 (around 63.5% penetration). As at September 2008,the TIM Brasil Group supplied 35.2million lines (up 20.7% compared with the end of September 2007, and up 12.6% compared with December 31, 2007), corresponding to a market share of 25.0% (25.9% in September 2007).
Consolidated TIM Brasil Group revenues for the first nine months of 2008 amounted to 10,178 million reais, up 5.0% (484 million reais) compared with the same period in 2007 (revenues from services were up 6.8%). Strong growth in the customer base, particularly among prepaid customers and higher penetration among lower income sections of society, along with a competitive environment characterized by promotions, particularly regarding on-net offers, led to 5.0 reais reduction in ARPU (31.5 reais in September 2008, compared with 36.5 reais in September 2007).

ConsolidatedEBITDA in the first nine months of 2008 amounted to 2,241 million reais, up 1.1% compared with the same period in 2007 (a rise of 25 million reais). The EBITDA margin was 22%, 0.9 percentage points lower than the same period in 2007. Improved EBITDA reflects the TIM Brasil Group’s commitment to generating greater value while keeping an ongoing check on costs, against the backdrop of a fiercely competitive Brazilian market where prices and service margins have both been driven down. In September 2007, when the company implemented a new credit and payments management system, in Q3 the company analyzed trade receivables from the sale of handsets on installment plans, and booked 173.3 million reais in lower receivables, compared with 54.7 million reais in lower handset revenues and 118.6 million reais in higher losses on receivables.

Consolidated EBIT as at September 2008 amounted to 183 million reais, (118 million reais during the same period in 2007). This result is due to the growth of revenues and improvement in EBITDA, following growth in the customer base and the rollout of new services and to lower amortization, owing principally to the completion of this in relation to the TDMA network.
This may be ascribed to an improved operating result, higher revenues and improved EBITDA (), and benefits arising from the full amortization of the TDMA network.Capex for the first nine months of 2008 amounted to 2,749million reais (1,190 million reais in the first nine months of 2007). The 1,559 million reaisincrease was predominantly the result of acquiring 3G licenses, expanding the customer base, and investments in 3G network infrastructure and IT.

As at September 30, 2008, the company employed 10,160 people, a rise of 130 compared with December 31, 2007.

OLIVETTI

Revenues amounted to252 million euros, down 31 million euros compared with the same period in 2007 (down 11.0%). Excluding changes to the consolidation area and exchange rate fluctuations, the organic change in revenue was minus 16 million euros (down 6.0%).

EBITDA came in 23 million euros lower (2 million euros down onthe same period in 2007). This fall was minimized by recouping fixed costs, partially offsetting a slowdown in sales.
The following table provides a breakdown of the organic variation, which was a positive 9 million euros (up 28.1%):

1 Jan - 30 Sep

1 Jan - 30 Sep

Change

(millions of euro)

2008

2007

absolute

%

EBITDA (HISTORICAL BASIS)

(23)

(21)

(2)

(9.5)

Effect of change in the scope of consolidation

-

(7)

Effect of change in exchange rates

-

(4)

COMPARABLE EBITDA

(23)

(32)

9

28.1

EBIT was down 28 million euros, a 4 million euro improvement compared with the same period in 2007. The following table provides a breakdown of the organic variation, which was a positive 16 million euros (up 36.4%):

1 Jan - 30 Sep

1 Jan - 30 Sep

Change

(millions of euro)

2008

2007

absolute

%

HISTORICAL EBIT

(28)

(32)

4

12.5

Effect of change in the scope of consolidation

-

(7)

Effect of change in exchange rates

-

(4)

Non-organic (Income) Expenses

-

(1)

COMPARABLE EBIT

(28)

(44)

16

36.4

Capex for the first nine months of 2008 amounted to 2 million euros,down di5 million euros compared with the same period last year.

As at September 30, 2008, the company employed 1,214 people, a fall of 65 compared with December 31, 2007, mainly as a result of disposals.

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The Telecom Italia Board of Directors is pleased to announce establishment of the Telecom Italia Foundation, which will begin operations in 2009, following the completion of procedures required by law.

A fund-giving corporate body, the Telecom Italia Foundation has been conceived as an expression of the Telecom Italia Group's commitment to a strategy of community sustainability. As such, the Foundation will promote the analysis, growth and development of potential in the communities where the Group operates.

In particular, the Foundation will be active in social assistance through education and welfare initiatives targeted at the more exposed and disadvantaged members of society. The Foundation shall foster education, training and scientific research-based projects, and protect historical and artistic heritage by developing innovative methods and approaches to the use and dissemination of knowledge.

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The Board of Directors has nominated Patrizia GriecoCEO of Olivetti, with a mandate for sales and process implementation.Francesco Forlenza, who is currently Executive Vice-President, will take over as Chairman, maintaining his responsibilities over Staff and Quality.
Mauro Nanni remains on the company’s Board of Directors.

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EVENTS OCCURRING AFTER SEPTEMBER 30, 2008

In October 2008, Telecom Italia S.p.A. and Telecom Italia Finance S.A. bought back company bonds with a respective nominal value of 60.8 million euros and 85 million euros.

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OUTLOOK FOR THE CURRENT YEAR

The Telecom Italia Group confirms its expectation of meeting the earnings and financial targets for the current year as stated in the first half 2008 financial report.

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Compliance with listing requirements as per article 36 of Market Regulations
Pursuant to the current regulatory framework and to CONSOB clarifications regarding the terms and conditions for listing domestic companies that control companies outside Europe, the Board of Directors has conducted the necessary enquiries and hereby states that the company is in compliance with the provisions set forth under article 36 of Market Regulations. The Board also wishes to clarify that Telecom Italian shall include with the financial statements that it files prior to its Shareholders' Meeting additional financial statements (at the very least, comprising a balance sheet and statement of income) for significant companies outside Europe, as prepared for the purpose of drafting Telecom Italia’s consolidated accounts. These financial statements may be drafted for the company itself or in consolidated form with regard to sub-holding companies located in the same nation as indirectly-controlled companies.

The results for the first nine months of 2008 will be presented to the financial community during a conference call starting at 4:30 pm. (Italian time)Journalists will be able to follow the presentation (which will not be followed by a Q&A session) by dialing +39 06 33168.

Journalists who are unable to listen in live may access a recording of the presentation by calling +39 06 334843, (access code 219940#).

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